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Tax Reform Eve

October 31, 2017

T-MINUS ONE DAY: House Ways and Means Chairman Kevin Brady (R-Texas) is scheduled to drop his eagerly anticipated tax bill in just one day, and there’s still a lot of frenzy surrounding the House GOP’s efforts.

In fact, you’d be excused for thinking the House Republican tax writers are having something like a last-minute cram session today. Ways and Means Republicans are supposed to start huddling early this morning, and meet into the evening as Brady and company try to put the finishing touches on their tax overhaul. The Ways and Means chairman, along with Speaker Paul Ryan, is then expected to brief the GOP conference-at-large on his work on Wednesday morning.

That schedule comes amid open conversations both on K Street and among congressional staffers about whether Wednesday’s scheduled release will be fully fleshed out and ready for the Ways and Means Committee to mark up.

MORE ON THOSE ISSUES OUTSTANDING: House Republicans are still considering whether to enact punitive measures against companies — think Big Pharma — that shift jobs out of the U.S., Pro Tax’s Brian Faler reports. That’s something President Donald Trump repeatedly has called for, but it’s not an idea that would necessarily simplify the tax system, either. “One possibility would be requiring firms that pull up stakes and still sell their wares to American consumers to pay the full U.S. domestic corporate tax rate, instead of a minimal tax on foreign earnings lawmakers are considering,” Brian writes. That would be similar to what former House Ways and Means Chairman Dave Camp (R-Mich.) proposed back in 2014, but potentially also could expand to include foreign companies operating in the U.S. — an idea that naturally worries the group that advocates for those corporations, the Organization for International Investment.

AND DON’T FORGET THAT CORPORATE RATE: Trump has called cutting the corporate rate from 35 percent to 20 percent his red line on taxes, but one of the questions hanging over that proposal was whether it cost so much that Republicans would have to phase in that rate. Now, Bloomberg reports that the GOP is discussing phasing the rate in over a five-year span, 3 points at a time.

That would potentially mean the corporate rate wouldn’t drop to 20 percent until 2022, which has some tax analysts worried the plan won’t pack the needed economic punch. (And that’s not even getting into the question of whether the rate would have to expire because of budget rules.) Lots of Washington tax people say at the very least that they won’t be surprised if the corporate rate needs to be implemented in chunks. But because it’s the Senate with the strict budget rules, that phase-in wouldn’t necessarily need to first come from the House. (For instance, the 2001 Bush tax cuts passed with a 10-year expiration date, but the first House bill didn’t have any sunsets.)

ADVICE FOR DAVID KAUTTER: Mark Everson, the former IRS commissioner during the George W. Bush presidency, has some advice for David Kautter, Treasury’s assistant secretary for tax policy who will soon take on a second role as acting IRS chief. First off, Everson told Morning Tax, the new acting commissioner needs to make sure he respects the expected firewall between the IRS and Treasury — to understand what matters can be discussed between the two and which should solely be IRS issues. “He has to be very careful and respect the fact that enforcement matters can’t be shareable, can’t go into Treasury,” Everson aid. “You have to be careful to ensure that separation is maintained.”

Everson added that it would likely be tougher to balance the two positions after a tax overhaul was passed, because the IRS would concern itself with the implementation of new tax law more than the policy itself. But Everson, now at alliantgroup, added that there could be a pretty good chance that Kautter would be back to one job if a tax reform measure was being implemented — there’s a limit of 210 days for an acting commissioner.

Continue reading the full article.

The Honorable Mark W. Everson served as Commissioner of Internal Revenue from 2003 until 2007. Prior to joining the IRS, Everson held Bush administration posts as Deputy Director for Management for the Office of Management and Budget (OMB) and Controller of the Office of Federal Financial Management. Everson also served in the Reagan administration, holding several positions at the United States Information Agency and the Department of Justice. In the private sector, Everson served as Group Vice President of Finance at SC International Services, Inc., a $2 billion food services company, and as an executive with the Pechiney Group, one of France’s largest industrial groups.

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